Can I CAN-SLIM? 7 - Learning from Mistakes

Thursday, Oct 26 2017 by

"Forget your ego, swallow your pride, stop trying to argue with the market, and don't get emotionally attached to any stock that's losing you money. Remember: there are no good stocks; they're all bad... unless they go up in price." William O'Neil, How to Make Money in Stocks 4th Edition Page 253.

It has been a while - so much has been going on with the CAN-SLIM portfolio, every time I'm about to write, something else comes along and what I was going to write suddenly seems irrelevant. So rather than give a blow by blow account of buys and sells, I thought I'd concentrate on two sells - one I consider to be a good example of using CAN-SLIM principals and one I consider not to be...

So let's start with Boohoo.Com (LON:BOO)

I bought this back in May and it was around 20% of my portfolio. At two points over this period it was up 45%. I identified a cup/handle formation and increased my holding to 40%. I bought at the top of the handle (see purple dotted line) and initially it underwent a short rally. There was some discussion underneath my own blog with some excellent analysis regarding how the stock might react to the results being in line with expectations.  The market reacted badly to the interim statement, resulting in a failed base. You can't be right all the time, but.... regular readers won't believe it... I broke the first rule of CAN-SLIM - I held onto it!! I was sure that it would be a temporary drop, so ignored the need to sell. I think it was partly because I had bought it twice. Unfortunately the second purchase`se was almost at the top, so I was quickly in negative territory. Eventually I saw sense, swallowed my pride, but not before I turned a +45% gain to a -22% loss (overall because I purchased a second lot at the top). I never pretended to be a CAN-SLIM guru, but this is embarrassing for someone writing a blog on the subject! Can you imagine?? Ah well. It just shows how powerful the attachment emotion can be.

So from this I have two lessons:-

1) Don't ever accept a greater than 8% loss. I

2) Don't put all your eggs in one basket - 40% was too much to hold…

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2 Posts on this Thread show/hide all

tradermark1968 2nd Nov '17 1 of 2

Hi, do you use a consistent approach to selling? i.e. break of a moving average, hitting a target price or % gain etc. Minervini also aims to sell into strength rather than risking a share rolling over.

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maffs0 5th Dec '17 2 of 2

Hi and thanks for your comments.

Like you, I held onto Boohoo.Com (LON:BOO) too long and gave back some of the amazing gains I have made over the last few years. Sticking to the 8% rule can be really hard. I sold XLMedia (LON:XLM) recently in the mid 135s as it was down 9%, now it has flown up over £2 and I've not been able to get back in. But rules are rules and its important the XLMs of the world don't drive our investment style.

I did give Redrow (LON:RDW) a bit of slack and it has paid off. The reason I gave it some slack was that I feel it is in many ways a "value and growth" share and was going down on negative sentiment towards the whole sector. I'm glad I've held this one and it is recovering nicely.

Selling on the way up is very hard for me. I managed to do it recently with Games Workshop (LON:GAW) and Fevertree Drinks (LON:FEVR) but I struggled emotionally when they continued up. They have both now fallen well below my selling price. I feel this is an area I need to improve on.

Watchlist wise I'm really keen on SSP (LON:SSPG) but haven't had a clear buy signal on decent volume. If you look at weekly chart, you can see clear signs of accumulation. Microgen (LON:MCGN) is another but recent up days have been on low volume so I've not taken the leap yet.

I bought some Computacenter (LON:CCC) recently after it spiked up but I have a fairly tight stop on this one. I also managed to get a full position in Burford Capital (LON:BUR) with an average price of £11 which I'm happy with. I think this might have some legs. And good old IQE (LON:IQE) which has had a difficult few days but I continue to think that it has further to go. (What did I say about selling on the way up?).

A full position for me is 1/8 of my portfolio size. IQE is more than this because it has risen so much but I rarely go above 1/8 in terms of purchase price. I also tend to begin with a 1/4 position and add as the trade works out.


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